Thoughts from the interface of science, religion, law and culture

After spending several years touring the country as a stand up comedian, Ed Brayton tired of explaining his jokes to small groups of dazed illiterates and turned to writing as the most common outlet for the voices in his head. He has appeared on the Rachel Maddow Show and the Thom Hartmann Show, and is almost certain that he is the only person ever to make fun of Chuck Norris on C-SPAN.

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US Tax Burden Compared to Other OECD Countries

To hear the right tell it, the United States is horribly overtaxed. But compared to other industrialized nations, our tax burden is among the lowest in the world. Citizens for Tax Justice looked at taxes collected as a percentage of GDP in the OECD countries and found exactly that.

Of the 34 OECD countries, the US ranks 32nd, with only Mexico and Chile having lower rates. And at 24.8% of GDP, we’re just barely over half the countries at the top (Denmark, Sweden, Belgium) and about 50% lower than the average. And yet we spend more on defense than those other 33 countries combined, and by a significant margin. That has long been our problem, of course; we want to be an empire but we don’t want to pay for it. Thus, we start wars that cost trillions of dollars while simultaneously cutting taxes, in effect writing a huge IOU to ourselves that we have to pay back with interest.

Also interesting are the trends. Since 1979, we have steadily slid down the list from the middle of the pack to one of the least-taxed countries. Also bear in mind that there has been a huge shift in where that tax burden is placed. In 1955, 27.3% of federal revenue came from corporate income taxes; today it’s 8.9%, with two-thirds of all corporations paying no income taxes at all and some of the largest and most profitable companies actually getting taxpayer money transferred to them rather than paying in. As a percentage of GDP, in 1955 corporate taxes were 4.3%; today they are 1.3%. Personal income taxes, on the other hand, have gone from 58% of federal revenue to 81.5%.

If we were to return corporate tax rates to where they should be, it would raise about half a trillion dollars a year (even now, when GDP is down; when the economy cranks up again, it would be even higher).

Comments

“Of the 34 OECD countries, the US ranks 32nd, with only Mexico and Chile having lower rates.”

Ah, but as I’ve stated in the past, Mexico (economically) is exactly where the truly wealthy in the US (top 0.001%) are trying to take this country. And they are continuing to succeed.

The reason I’ve mentioned Mexico in the past was an interesting bit of trivia from the 90s that Mexico was actually number 4 when listed in order of the number of millionaires residing in a country. Basically, Mexico arrived at the US wealth inequality (http://www.youtube.com/watch?v=QPKKQnijnsM) well before we did.

“And yet we spend more on defense than those other 33 countries combined, and by a significant margin. That has long been our problem, of course; we want to be an empire but we don’t want to pay for it. Thus, we start wars that cost trillions of dollars while simultaneously cutting taxes, in effect writing a huge IOU to ourselves that we have to pay back with interest.”

Part of the reason those other countries get away with spending so little on defense is because they take advantage of your military (indirectly) defending them (such as by keeping trade routes secure). If you cut military spending, those countries would, if they wanted the same level of security, have to spend more on guns and less on butter.

For extra kicks, compare that list to the inequality-adjusted human development index. I’m just eyeballing it, but it looks like there’s a pretty significant degree of correlation; the Nordic countries take up rather significant chunks of the top portion of both lists…

I’m reading a interesting book called Why Nations Fail by Daron Acemoglu and James A. Robinson.
Their thesis in a nutshell: lack of opportunity/ economic inequality creates economic basket cases (such as Mexico, exactly the kind of state that libertarians and tea-baggers want to create in the US).
Perhaps the tax rate as a percentage of GDP is too crude a measure. Who is paying tax and how much? What level of amenity is being created with the taxes collected (Are they being used to prop-up certain industries? Used to support the life-styles of politicians or plutocrats? Squandered on military adventurism? And so on).
For example the Human development index (2013) places:
1. Norway (0.955)
2. Australia (0.938)
3. USA (0.937)
4. The Netherlands (0.921)
5. Germany (0.920)

The US (and Australia) might have low taxes, but they seem to be able to transfer the little they get into high literacy, long life spans, high standards of living and quality of life. Denmark and Norway not so much.